Yeah, But Would Charles Darwin Sell The Dallas Morning News?

The tizzy over Rupert Murdoch's buying The Wall Street Journal and the constant hand-wringing about the death of the newspaper business are doing one of those déjà vu things for me. It’s also doing one of those I-told-you-so things.

I remember getting not just derisive laughter but outright hostility in January 1999 when I wrote a story for D’s short-lived business publication, D Business, which asked the simple question: "Should A.H. Belo sell The Dallas Morning News?" It's a question the Los Angeles Times sort of asked only yesterday, as it looked at the newspaper biz's dwindling dynasties.

The D Business story was triggered by the first in what would become a series of draconian layoffs in the newsroom that have since eaten the heart out of the newspaper I came to work for in 1980, at the height of the late, lamented newspaper war between The News and the Dallas Times Herald. About 200 people were affected, nine percent of the reporting and editing staff.

It was impossible not to compare that with the slash-and-burn cuts and buy-outs that had happened when Belo acquired the Press-Enterprise in Riverside, California, and the Providence Journal. In 1998, Belo had racked up the worst performance of 29 major media stocks, declining in value 47 percent. It’s standard procedure for a bride to dress up the margins before going looking for a groom.

Rumors of a possible sale were rampant, but when I asked the question, reporters looked at me like I was a leper who had managed to get off the desert island and into the newsroom:

"That's unthinkable," one journalist says. "It will never happen."

"Belo is The Morning News," says another.

But another veteran reporter, perhaps a bit more familiar with balance sheets and the extraordinary performance of Belo's broadcasting properties, is not so sure.

"If you're looking at it in strictly financial terms, I can absolutely see that happening," he says. "But they won't. Owning a newspaper gives people like [Robert] Decherd a certain voice and stature. It's like owning a professional sports team."

Yep, and when the team bleeds red for too many years, smart owners start to think of other, more profitable ways to stroke their egos.

By 1999 it was easy to see that the internet was eating away at newspaper profits, and no clever ideas like CueCat could slow it down. Belo’s move to becoming a broadcast conglomerate was underway; it was already the third-largest independent broadcast company in the nation. The growth had been financed by the cash cow people read over coffee. For most of the '90s, the paper had operating margins higher than 30 percent, sometimes as high as 36 percent. A typical daily paper was 23 percent, making The News one of the most profitable newspapers in the U.S.

But the cow’s teats were drying up.

Stockholders couldn’t help but notice that their holdings would be worth a lot more without the dreary old media dragging the company down.

Two years before, the Harte-Hanks newspaper sold its newspapers, divesting its’ founders stake to focus on spin-offs like direct marketing, which made more money. "There wasn't much to the decision,” Christopher Harte, grandson of a founder and member of the Harte-Hanks board, explained. “The other divisions were too profitable, and the multiples for newspapers were too high. It was time to sell."

I wrote:

By selling off its newspapers, broadcaster Belo could wipe the debt off its balance sheet, concentrate its resources, and mount a campaign to make itself the No. 1 independent in the nation. Any lingering familial sentiment about Col. A. H. Belo and G. B. Dealey would doubtless be somewhat cushioned by a soaring stock price. Just ask the Hartes.

Not long after the Harte-Hanks divestiture, Robert Decherd, chairman of Belo had told Forbes: "I'm a Darwinist. Only the strong survive, and they get stronger in adverse economic conditions."

But sell the paper? A few years later, I had lunch with a top editor who was still laughing at that story -- and clearly questioning my sanity. He’s no longer at The News, opting instead for one of the later buy-outs “offered” to senior staff.

In the last week, The News posted a story about Belo’s weak stock performance; Belo’s profit fell near 15 percent in the second quarter compared with the previous year, with newspaper revenue “declining sharply.”